The musings of a husband, father, and retired U.S. Army officer and public school superintendent.

Saturday, May 14, 2011

Manufactured Budget Crisis?

The Michigan Senate Fiscal Agency released its economic outlook this week in advance of Monday's official revenue forecast. The Senate's revenue predictions are based on the tax requirements prior to Governor Snyder's huge shift in taxes from business to individuals, particularly retirees and lower income workers.

In fiscal year (FY) General Fund/General Purpose (GF/GP) and School Aid Fund (SAF) revenue is expected to total $18.8 billion, up 6.6% from FY 2009-10. The increase reflects an improving economy, combined with lower income tax refunds, and is $557.3 million above the January 2011 consensus estimate. General Fund/General Purpose revenue is estimated to rise 12.8% to $7.7 billion while SAF revenue will increase 2.7% to $11.1 billion.

In FY 2011-12, the economy will grow more slowly than in FY 2010-11, resulting in slower revenue growth. General Fund/General Purpose and SAF revenue will total an estimated $19.2 billion, up 2.2% from FY 2010-11 and $690.5 million above the January 2011 consensus estimate. General Fund/General Purpose revenue is expected to increase 2.3% from the FY 2010-11 level to $7.8 billion and SAF revenue is projected to grow 2.1% to $11.3 billion.

In FY 2012-13, GF/GP and SAF revenue will total an estimated $19.3 billion. This initial estimate for FY 2012-13 is 0.7% higher than the revised estimate for FY 2011-12, with substantial tax changes causing revenue to grow much more slowly than economic conditions would suggest. General Fund/General Purpose revenue will total an estimated $7.6 billion, a decline of 2.6% from FY 2011-12, while SAF revenue will rise to an estimated $11.7 billion, a 3.0% increase.

It now appears that much of Governor Snyder's "doom-and-gloom" predictions regarding our state's economy were misleading, or at the very least uninformed. Consequently, the Governor seemingly manufactured a crisis that allowed him to get away with (for now) shifting a billion dollars from K-12 public education through colleges and universities to support a general fund reduction in business taxes. While there's no guarantee that the Governor's plan will aid job growth in this state, there's definitely a guarantee that his cuts to public education will increase job loss, lead to higher class sizes, and further damage urban schools at a time when the focus should be on improving student achievement.

The new question is: “Why, with a big surplus in the state’s school budget, is my school district being cut so much?” The answer at this point seems to be: "Because we can.” That’s probably not going to go over well.

And he wrote this weeks before the Senate Fiscal Agency's belated projection, and passage of huge K-12 cuts by both branches of the legislature. He updated his thoughts after both narrowly passed separate versions of a K-12 budget bill and predictions of the surplus began to surface:

Even as lawmakers were casting politically perilous votes to cut schools in the past few weeks, an assumption was emerging that the state could have as much as $500 million more in revenue than was estimated in January.

According to an analysis released Friday by the state House Fiscal Agency, the tax overhaul will cost the School Aid Fund more than $660 million a year. In 2011-12, the lose of revenues from the business tax means the State Aid Fund will have $10.6 billion versus $11.3 billion. That equates to about $440 per student.

It's going to be an interesting couple of weeks coming up, but in the end there will be winners and losers. The question, Governor Snyder, is whether you plan to bet Michigan's future on short term business gains with no guarantee of increasing job opportunities, or the education of our children who are the future of this great state?